Citi, JPMorgan temporarily halt foreclosures
Banks announce weeks-long moratoria on foreclosures as the government works out a rescue plan for homeowners.
NEW YORK (CNNMoney.com) -- JPMorgan Chase and Citigroup Inc. announced plans Friday to temporarily halt foreclosures as the government works to finalize the details of a financial rescue package that could include billions of dollars in aid for struggling homeowners.
The announcements come as regulators and lawmakers have stepped up pressure on financial institutions to suspend foreclosures until the plan comes out.
Vikram Pandit, Citi's (C, Fortune 500) chief executive, and Jamie Dimon, JPMorgan's (JPM, Fortune 500) CEO, both indicated their willingness to suspend foreclosures during testimony before Congress Wednesday.
Citi said the moratorium is effective Feb. 12 and will remain in place until March 12, or until the Obama Administration finalizes the details of its loan modification program, whichever comes first, the bank said.
The suspension will apply to home loans on a borrower's principal residence and to loans serviced by Citi in cases where an understanding has been reached with the investor.
In a letter to Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee, Dimon said JPMorgan has initiated a foreclosure moratorium through March 6, which would extend a program the bank announced last year.
"We believe three weeks is adequate time for the Treasury to announce - and for us to implement - a new plan," Dimon said.
Treasury Secretary Tim Geithner on Tuesday outlined the Administration's priorities for the second half of the $700 billion allocated under the Troubled Asset Relief Program, which includes spending $50 billion on foreclosure relief.
However, the details of that plan have yet to be worked out.
Geithner and Housing Secretary Shaun Donovan have been meeting with banks, housing advocates and trade organizations this week to listen to their foreclosure prevention proposals.
Among the proposals being discussed: requiring homeowners to take an affordability test and undergo a re-appraisal to see if they are eligible for a government subsidy. Regulators are also looking into more efficient ways to modify loans for borrowers already in default.
President Obama will elaborate on the Administration's foreclosure plan Wednesday, when he delivers a speech in Phoenix, White Hose Press Secretary Robert Gibbs told reporters Friday.
"We stand ready to work with you [Frank] to put the appropriate processes in place, including a national modification standard, to reduce the incidence of foreclosure and to encourage long-term, sustainable home mortgages," Dimon wrote.
In November, Citi announced a Homeownership Assistance Program, which was aimed at helping 500,000 Citi borrowers with mortgages worth about $20 billion stay in their homes.
Under that plan, borrowers needed to have "sufficient income" and be "making a good-faith effort" to repay their loans to qualify for assistance, said Steve Silverman, a Citi spokesman. The current moratorium lifts those restrictions, he said.
Separately, mortgage giant Fannie Mae said it will suspend all foreclosure sales and evictions of occupied properties through March 6 in anticipation of the government's mortgage assistance plan.
The company also said it has adopted a national Real Estate Owned Rental Policy that allows renters in Fannie Mae-owned foreclosed properties to remain in their homes or receive financial assistance if they choose to seek new housing.
The company had previously frozen foreclosure sales through January and had ceased evictions through the end of February.
Fannie Mae (FNM, Fortune 500) and fellow government-sponsored lender Freddie Mac (FRE, Fortune 500) are the largest sources of funding for the U.S. housing market, with mortgage portfolios worth $1.7 trillion.
Both companies have suffered major losses as delinquencies rise amid the turmoil in the housing market. In September, Fannie and Freddie were placed into conservatorship by the federal government and have received billions of dollars in federal aid.